Churn is a natural part of running a subscription business. In the streaming world, user behavior is developing where a large percentage of users subscribe for a hit show and then unsubscribe soon after. Market data platform, Antenna, released its latest data showing this trend and The Wall Street Journal wrote about it:

We should expect this user behavior and learn from it because it's honestly not terribly surprising. We can see the same thing occurring in the publishing world. At the core of it, it helps to understand that there are often two different types of content that acquire and retain subscribers respectively.

The first category are the major hits, which drive a ton of subscriptions. This makes sense. In the case of Wonder Woman 1984, I remember seeing ads all over the place for it, which is what encouraged me to subscribe. Had there been nothing else to watch after sitting through that movie, I likely would have churned.

Which brings us to the second category, which is the library. Once we were done with WW84, we started to look for other material. And we started watching The Sopranos, which was a first. We now had seasons of amazing television to watch, so we were more inclined to stay subscribed.

Hits drive subscriptions; the library retains those subscribers.

This explains why some of the larger streaming partners are doing well. For HBO, Netflix, and Disney, the libraries are all very deep. Therefore, using a big piece of content to acquire a bunch of subscribers and then trying to get them hooked on the library is important.

This might also explain why HBO and Disney have opted to release shows on a weekly cadence rather than all at once like Netflix. If the goal is to get users to stay subscribed for longer, one way is to drip them content so they have no choice. Since they're staying subscribed for the one show, are they likely to dip into other content in the library?

What about the Paramounts and Peacocks of the world, which are smaller and struggling to catch up? One option for them would be to reacquire the streaming rights that other platforms—Hulu, Netflix, etc.—have licensed. This can't be done overnight, but if the goal is to boost the library, this would be a smart strategy in the long term.

What about Netflix? If the smaller players stick around long enough and do actually start reacquiring licensed content, that will weaken the library significantly. Could that result in churn? Netflix has been expecting this, which is why it spends so much money on content.

However, with competition now getting heavier and shows leaving Netflix, could Netflix change to a slow drip on its hit content to keep people engaged for longer? It's speculative, but when Netflix broke the trend by releasing a show all at once, its competition was much weaker than it is now. If Netflix needs to keep users engaged for longer to get hooked on the library, a monthly drip would be one way.

But what about publishers?

Let's use The New York Times as an example. Over the past year, it has acquired a lot of star power contributors. Ezra Klein joined as an opinion columnist in 2021; Kara Swisher has a newsletter for paying subscribers. Or, what about The Atlantic, which has been building out its star-studded newsletter product.

All of these contributors are bundled into the subscription for NYT or The Atlantic. My suspicion is that these people drive a solid percentage of the subscriptions. However, what likely keeps people around is the complete breadth of the content that is available with a subscription. The stars drive the subscriptions; the other 1,000+ reporters create a library that retains subscribers.

This means publishers do have to be thinking about creating two types of content as well. Figuring out what will get a subscriber to convert and then also understanding what keeps them will help keep the product growing. But it's like a well balanced diet. Too much dessert—the star power—and not enough vegetables—the library—will result in a very boom and bust subscription product.

The goal is use the star studded content to acquire as many users as humanly possible and then keep them around with the library. Even if half the subscribers churn, the other half will stick around.

This is different, by the way, from the strategy of incredibly low priced subscriptions to acquire as many people as possible. This strategy creates a bad behavior in the user because they get used to paying low rates and when it comes time for you to charge more, they churn. It is far better to lose subscribers because you don't serve them with the right content than to lose them because they don't want to pay as much as you want to charge. It might seem like semantics, but it allows you to build on a much more secure foundation.

Take the Seattle Times, for example. The Times' senior vice president of product, marketing and public service, Kati Erwert, told the Press Gazette:

This is the exact right attitude to have. The goal when running a business is to generate revenue, not subscribers. Therefore, the goal needs to be acquiring revenue generating subscribers. The problem with chasing bulk numbers is that the user is far less sticky because you're using questionable tactics.

However, with these companies focusing on investing in high quality content, it retains subscribers that are paying much higher prices. I would rather have a higher ARPU with fewer subscribers than the alternative of a ton of subscribers, but with low ARPU. I can acquire more people by investing more in content; I can't get over users getting used to low priced subscriptions.

I will close with this... The most important thing we can do as publishers, streaming platforms, podcasters, or any content creator is to be consistent. Andy Weissman of Union Square Ventures tweeted this on Monday: "Quality is perception, consistency is for certain." Use the star content to acquire users, but then keep them by consistently delivering new content. It's two types with the same goal: growing subscription revenue.

Churn is expected. I don't see much fault in the high churn numbers with these streaming services because the behavior is expected. If, however, we start to see churn increasing from those that have been using the library, then we know there is a problem. We'll have to wait and see what these companies tell us.

Thanks for reading today's newsletter. If you have thoughts, hit reply or become a premium member so you can join the AMO Slack channel. Have a great week!